Compare Current Mortgage Rates in Kentucky

Mortgage rates in Kentucky vary based on where you live, the type of home loan you’re getting, and other factors — like your credit score and current economic conditions. But, the rate you get can significantly impact your monthly mortgage payment and the total cost of the loan.

That’s why it’s important to understand how mortgage rates in the state are determined, and what you can do to get the best rate possible.

If you’re ready to buy a home in Kentucky, here’s everything you need to know about mortgage rates — and how to make getting a home more affordable.
 

Lenders in Kentucky set mortgage interest rates based on factors that are within and beyond your control. These are the main outside sources lenders reference when determining rates:

• Current inflation rate: The rate of inflation shows how everyday prices change every year. It can also influence mortgage rates. In times of high inflation, rates tend to increase — and vice versa.
• Housing market: The current housing market in your area also affects mortgage interest rates. For example, you may see rates drop if there are more available homes and fewer buyers on the market.
• Federal Reserve’s federal funds rate: The Fed doesn’t set mortgage rates, but it does influence them by setting the federal funds rate. When the Fed raises the federal funds rate, mortgage rates usually increase.

Kentucky-based lenders consider more than just economic conditions when setting rates, however. They also factor in what is in your control, like:

• Your credit score: This is a three-digit number that ranges from 300 to 850. If you have good credit — a score of 670 or higher — lenders may view you as a lower risk. They may also offer you a lower interest rate.
• How much you put down: Depending on the lender and loan type you get, you may need to have a minimum down payment. The more money you pay upfront, the lower your rate could be.
• Home loan type: In Kentucky, you can find many different types of home loans, including conventional, USDA, VA, FHA, and jumbo loans. The mortgage type affects your interest rate.
• Loan amount: Rates tend to be higher on larger loans than on smaller loans. Having a larger down payment or buying a cheaper home could help you get a better rate.
• Loan term: Most mortgage loans come with 15- or 30-year repayment terms. Longer terms usually have a higher interest rate than shorter terms.
• Type of interest rate: Lenders offer either fixed- or variable-rate loans. Fixed-rate loans have an interest rate that stays the same throughout the life of the loan. Variable-rate loans may fluctuate with market conditions. Some variable-rate loans have a lower starting rate that may increase over time.
• Where the property is located: Rates may vary by county or city. Larger cities where housing costs or demand are high, such as Lexington, Louisville, and Bowling Green, often have higher rates than less in-demand areas. For example, the median home price in Lexington, Kentucky, was $310,343 in January with an average 30-year fixed rate of around 6.500%.

Home prices in Kentucky are lower than in many other states, but both first-time and repeat buyers still struggle to afford property.

Kentucky Housing Corporation (KHC) offers first-time homebuyer programs to make housing more affordable.

Whether you’re looking for a home in Lexington, Bowling Green, or somewhere in between, here are KHC’s main programs for first-time and repeat buyers:

• Conventional Preferred: This program offers 30-year, fixed-rate mortgage loans through KHC-approved lenders. You’ll need a 3% down payment, a 660 minimum credit score, and a 50% maximum debt-to-income ratio (DTI) to qualify. Your household income must be no greater than 80% of the area median income (AMI), which was $51,920 to $81,840 in 2023. The maximum home purchase price is $481,176.
• Conventional Preferred Plus 80: This program has nearly the same requirements as the Conventional Preferred program. However, the income limits range from $137,550 to $181,300. With both programs, you may need to take a homeowner education course before closing.
• Mortgage Revenue Bonds (MRB): First-time buyers in Kentucky could be eligible for a 30-year fixed-rate FHA, VA, or USDA loan with relatively low requirements. You must have a minimum credit score of 620 and meet your county’s income requirements. The maximum home purchase price is $481,176. By using MRB, you could get a below-market interest rate.
• Home Buyer tax credit: If this is your first home, you could be eligible for a tax credit of up to 20% of your annual mortgage interest. Income and property price limits apply. Speak with a KHC-approved lender to begin the process.

The KHC also offers a down payment assistance program to help eligible first-time buyers with their upfront costs. This is a loan with a 10-year repayment term and a 3.75% interest rate. The maximum loan amount is $10,000. There are no specific credit or income limits.

Some cities have their own first-time buyer assistance programs. For example, Louisville offers a forgivable loan to help with the down payment and closing costs. Income and purchase limits apply.

Here’s what you can do to get the best mortgage rate in Kentucky:

• Calculate your budget: Start by determining your homebuying budget. Use an online calculator to figure out your monthly payment and the total cost of the loan. 
• Build credit: If your credit score is keeping you from getting a good interest rate, take time to improve it. This could mean paying down debts, making on-time payments, or checking your credit reports for errors.
• Save for the down payment: The more money you can put down, the smaller the loan — and the lower your interest rate.
• Compare multiple lenders: Every Kentucky lender has its own rates, loan types, fees, and eligibility criteria. Shop around and compare lenders before choosing one.
• Choose the loan type: Kentucky lenders offer many types of home loans, each with different pros and cons. Compare your options to find the right fit for your financial background.
• Choose an interest rate type: Determine whether you want a fixed- or variable-rate loan. The type you choose could affect your monthly payments.
• Get pre-approved: Pre-approval doesn’t guarantee you’ll get a loan, but it’ll give you a better idea of how much you could qualify for and your potential rate.
• Get a rate lock: Some lenders offer a mortgage rate lock, which lets you lock in your rate for a set amount of time. This can be helpful if you qualify for a low rate right now and don’t want to lose it.
• Use discount points: You can purchase discount points upfront to lower your interest rate. These cost 1% of your total mortgage and are generally paid at closing.
• Refinance your home loan: If you currently have a mortgage, consider refinancing it. You could get a lower rate or reduce your monthly payments.

While every lender is different, these are the main types of mortgages in Kentucky and their typical criteria:

Conventional

• Typical eligibility: 620 minimum credit score, 3% minimum down payment, 45% maximum DTI ratio.
• Common characteristics: 10-, 15-, 20-, or 30-year terms, fixed or variable rate, $766,550 to $1,149,825 maximum loan amount, PMI often required if less than 20% down.

USDA

• Typical eligibility: No minimum credit score, no minimum down payment, the property must be in a qualifying rural area, and income limits may apply.
• Common characteristics: 15- to 30-year repayment terms, fixed rate, geared toward first-time buyers or those with limited savings, guaranteed by the United States Department of Agriculture.

FHA

• Typical eligibility: 3.5% minimum down payment (depending on credit), 500 minimum credit score, loan limits vary by location and may require an upfront MIP.
• Common characteristics: 15- to 30-year repayment terms, fixed or variable rate, geared toward first-time buyers, regulated by the Federal Housing Administration.

VA

• Typical eligibility: No minimum down payment, creditworthiness depends on the lender, no PMI requirement, must meet military service eligibility requirements.
• Common characteristics: 15- to 30-year terms, fixed or variable rate, potentially lower closing costs, backed by the Department of Veterans Affairs.

Jumbo

• Typical eligibility: Credit score or down payment requirements may be higher than other loans, 43% maximum DTI.
• Common characteristics: 15- to 30-year terms, fixed or variable rate, higher loan limits than conventional loans.